I am examining a level 2 mediator, which is mediating between level 2 predictor (X) on level 1 outcome (Y).

I read through the Preacher et al article 2010, which says that for implementing MSEM framework for mediation, if there at least one level 2 variable in the causal chain, the indirect effect of interest likely is a Between indirect effect.

Based on the above reading, this means we examine the between effect of the mediator on the between outcome variable (Y) rather than within outcome.